Common Mistakes When Terminating Employees For Theft, Part 1

Employee theft is an issue besetting retailers every day. A 2005 survey by the University of Florida puts the cost at $17.6 billion, and concludes that employee theft accounts for 47% of inventory shrinkage.

Responses to this epidemic range from low tech (like rewards for employees turning in thieves) to high tech (such as computer monitoring of transactions to reveal issues that would normally go undetected by managers). Yet unscrupulous employees remain undeterred and continue to try to beat the system. What is even more upsetting is that catching an employee red-handed on video sliding groceries will not prevent the employee from bringing some form of wrongful termination claim. Many individuals, even guilty ones, feel compelled to try to clear their name. Even though the employer will likely eventually win such a suit, the expense and time involved can cost hundreds of times the amount of the theft.

Employers usually have no choice but to terminate employees who engage in dishonest or even suspicious behavior. But mistakes are sometimes made and you could find yourself not only facing a lawsuit, but finding that your mistakes created potential liability to an individual who stole from your company.

In this issue, we'll look at some common mistakes that have resulted in what should be unassailable terminations going south in court.

Common Mistakes When Terminating Employees For Theft, Part 1 By Edward Harold (Retail Industry Update, No. 1, March 2011) Employee theft is an issue besetting retailers every day. A 2005 survey by the University of Florida puts the cost at $17.6 billion, and concludes that employee theft accounts for 47% of inventory shrinkage. Responses to this epidemic range from low tech (like rewards for employees turning in thieves) to high tech (such as computer monitoring of transactions to reveal issues that would normally go undetected by managers). Yet unscrupulous employees remain undeterred and continue to try to beat the system. What is even more upsetting is that catching an employee red-handed on video sliding groceries will not prevent the employee from bringing some form of wrongful termination claim. Many individuals, even guilty ones, feel compelled to try to clear their name. Even though the employer will likely eventually win such a suit, the expense and time involved can cost hundreds of times the amount of the theft. Employers usually have no choice but to terminate employees who engage in dishonest or even suspicious behavior. But mistakes are sometimes made and you could find yourself not only facing a lawsuit, but finding that your mistakes created potential liability to an individual who stole from your company. In this issue, we'll look at some common mistakes that have resulted in what should be unassailable terminations going south in court. The Investigation In virtually every employment lawsuit arising out of termination for wrongdoing, the first step of the termination process, the investigation, becomes the most critical years later in front of a jury. This is even more important when theft is involved. An allegation of theft is a powerful accusation and one that should never be taken lightly. While an employer ordinarily bears no burden of proof at trial, the jury will look for the employer to prove an accusation of theft beyond a reasonable doubt. The employee's first tack in a trial will be to attack the quality of the investigation. There are many important missteps to avoid. First, there should be at least two individuals involved in the investigation, and optimally, one should not personally know the subject. This will help avoid claims of a conclusion being trumped up against an employee because of hostility by the investigator toward the accused. For example, an employee might claim that the manager framed her for theft for refusing his sexual advances. If the company has a protocol for investigations, it must be followed to the letter. Juries demand that employers follow written procedures; failure to do so can also serve as evidence of pretext used to defeat summary judgment. Witnesses should write their own statements in their own handwriting. Nothing tanks the credibility of a witness faster than when on the stand, he does not know what some of the words in his statement mean. Employees being investigated must be allowed to tell their story and have it included as part of the record of the investigation. Otherwise, a jury may think that the employee was railroaded. The investigation must be thorough and an investigator should never limit the investigation to the witnesses identified by the accused if other individuals might have relevant knowledge. Catching The Thief The method used to catch thieves can also result in liability. Case law suggests that retail managers are fond of hiding baby monitors in break rooms to try to catch the employees talking about stealing. While the idea seems perfectly logical, it is also illegal under federal anti-wiretapping laws. Having the employee in a position where he cannot leave an investigatory meeting without going through a person leads to false imprisonment claims. Digging in an employee's purse without consent can generate invasion-of-privacy claims. Federal laws also regulate the use of lie detectors in investigations of monetary loss. Because of factors like these, it's important that an employer take several steps. First, all employees should sign an acknowledgement that they understand they have no privacy rights in items they choose to bring on the premises. While not required by federal laws, employees should also acknowledge that they are under video surveillance, and consent to it. Make employees aware that participating in investigations being conducted by the employer is mandatory and that refusal may result in termination. Finally, expressly advise employees that if they violate policies pertaining to the protection of company assets, they may be terminated without any finding of any intentional wrongdoing on their part. The Termination Meeting The termination meeting should not be the first time an accused learns that he or she is suspected of malfeasance. If there is a benefit to the investigation from not letting on to the employee that they are under suspicion, and termination is an almost foregone conclusion at the time of the interview, the decision to terminate should still not be made or communicated during the first interview. It is far better to suspend the employee pending the outcome. Many employees will not return for a follow-up meeting and can be terminated as having abandoned their job. There are far fewer facts to argue about when an employee is terminated for these grounds. How the termination meeting will be conducted depends heavily on how strong the evidence appears. If all the evidence points to theft, but is not conclusive, an employee should not be told he is being terminated for "theft" or "dishonesty" or even "suspicion of theft." This does not mean the employee should not be terminated. But accusing an individual of a crime is per se defamatory in many jurisdictions and can result in the employer being practically forced to prove that the employee in fact stole. Using language centering on your lack of trust in the employee, i.e., loss of confidence, is much less likely to be defamatory. Another possibility, where the employee, while not proven guilty, may bear responsibility for the loss under the employer's policies, is to connect the termination to the policy violation, not to a crime. In this scenario, the employee should also be told that no conclusion has been reached as to their culpability for a crime, but that he or she is being terminated because proper store procedures were not followed. Terminating employees for these stated reasons may not prevent the employee from securing unemployment compensation, but as discussed in Part 2 of this article, fighting unemployment compensation is overrated. In the next issue of Retail Sales Update, we'll also look at other problem areas in terminating for theft, including when – and when not – to call in the police. For more information contact the author at eharold@laborlawyers.com or 504-522-3303.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

"My best business intelligence, in one easy email…"

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Privacy Policy (Updated: October 8, 2015):

hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.